13. Appendix B Miscellaneous Factors Developed
from Special Studies 221-224

I. INTRODUCTORY STATEMENT

This rail cost formula, designated as Rail Form A, and published
as Statement No. IF1-73, has been developed for the purpose of
ascertaining rail costs for use in judging rate proposals.

This formula represents a revision of Rail Form A, 8-64
also identified as Statement No. 9-66 which has been used by
the Cost & Valuation Section for determining territorial costs.

Although Rail Form A has principally been used for the
purpose of developing costs for large groups of carriers, it
is also adaptable to small groups of carriers and to individual
carriers. It is suggested that individual carriers should make
every possible effort to develop their own operating factors
for use in applying this formula to their expenses and statistics.
Where this course will be unduly burdensome, the territorial
factors developed by the Cost & Valuation Section in special
studies which are included in the appendices of this formula
may be used. It is preferable, however, that each carrier
develop its own factors.

Stated briefly, Rail Form A provides for separating the
expenses among the various services, yard switching, train
switching, running, station, special services, and general

overhead, etc. with a further separation of some of these services
to the various types of operations performed within each service.
It also determines the related revenue units of service, such as
car-loads, car-miles, gross ton-miles, net ton-miles, tons originated
and terminated, etc. The formula further provides for developing the
unit costs for each service and combining such unit costs based on the
services performed on the various movements, thus producing cost
scales for various weight shipments moving in the different types of
cars by lengths of haul. The cost scales are based on the variable
costs, and on the fully allocated costs with the constant costs
distributed on a prorata ton and ton-mile basis.

Basically, the figures relating to expenses and statistics used
in this formula are taken from the reports filed with the Interstate
Commerce Commission by Class I line-haul rail carriers and Class I
switching and terminal companies. These are supplemented by special
studies which develop factors used in processing the expenses and
statistics throughout the various schedules, forms and summaries
which are components of Rail Form A.

II. Reasons for this Revision

Rail Form A has been in use for several years without a major

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revision. However, from year to year minor revisions have been
made. The result has been that the present automatic data pro-
cessing program is, in several instances, not as smooth flowing
as might be desired. For some time a general revision of the
ADP program has been under consideration and also the possibility
of revising the basic structure of the formula.

At the time that Rail Form A was last given a major revision,
about 10 years ago, the Commission did not have the computer
capability that it now has. Therefore, the design of the formula
at the time of the last major revision was primarily with a
view to manual application. This consideration dictated a for-
mat wh1ic was relatively effective for manual application of
the foui4'l but was not as conducive to subsequent analysis
as it. might, ave been.

S Today the .Cmmission has a high degree of computer capa-
bility and cobt formulas can be designed in such a way as to
Fully utilize that capability. Therefore a format has been
.adopted ikt this'revision which will greatly facilitate the
location of-d4ta for comparative purposes.
' "' .. .' -
'The primary purposes of this revision may be summarized
as follows:

1. To make the formula processes more readily under-
standable.
2. To facilitate the determination of the service func-
tions to which any given account is assigned.
3. To enable any given unit cost to be more readily
analyzed to determine the extent to which various
elements of cost enter into its composition.
I. To facilitate the addition of new accounts or the
subdivision of existing accounts as well as to per-
mit the inclusion of new service functions in the
formula distributions.
5. To make the formula flow smoothly from operation to
operation, thereby facilitating both ADP manual
application.
6. To provide for implementation of separate variable
ratios by account or groups of accounts.

III. Component Parts of the Formula

1. Schedule A:

Schedule A provides for the distribution of variable
expenses and cost of capital to the various service functions.
Variable costs are determined in this schedule by multiplying

annual report expenses times a variability ratio, the variable portion
is then distributed to various service functions.

2. Schedule B

Schedule B provides for computing variable unit costs. Costs
accumulated in schedule A by service functions are divided by applicable
service units to derive variable unit costs.

3. Schedule C

Schedule C provides for a distribution of constant expense (total
expense less variable expense) to service functions to determine constant
expense related to distance and constant expense not related to distance.

4. Schedule D

Schedule D provides for aggregating constant expenses related to
distance and those not related to distance. These costs are then
apportioned on a ton-mile & ton basis.

5. Form 1:

Form 1 provides for the accumulation of service units and other
statistical data used as a basis for distributing expenses throughout
the formula. Note: Non-revenue switching units are given a prorata
distribution to revenue service units. Consequently no expenses are
apportioned to non-revenue switching functions in Schedule A.

6. Form 2:

Form 2 provides for separation of cost of capital between the
various services, i.e. freight and passenger, special service and un-
related.

T. Form 3:

Form 3 is a manual tabulation of loss and damage claims and is in-
cluded with work papers.

8. Summary 1:

Summary 1 accumulates unit costs separately for various types of
cars. These costs are further separated between interline and single
line traffic and between average Way and Through Trains.

9. Summary 1A:

Summary 1A is a complete accumulation of unit costs for trailer on
flat car traffic which has been omitted from summaries 1 and 3.

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10. Summary 2:

13. Summry 5:

Summary 2 is a manual summary relative to less carload traffic
and is not included.

11. Summary 3:

Summary 3 accumulates data from Summary 1 into carload cost
scales, it is essentially the same as Table 3 of the annual carload
cost scales publication issued by the Section of Cost and Valuation.

A. PERCENT BASED ON ANALYSIS OF 13 LARGE CLASS I RRS. FOR 1965 G 1966.

*. SEE APPX, B, TABLE III, LINES 3 & 4.

1Z/ (TO LINE 42) ASSIGN COL* 5 EXPENSES TO COL. 12 WHEN THE SERVICES IN WHICHH THE FLOATING EQUIPMENT IS USED IS THE EQUIVALENT OF
RUNNING OPERATIONS. ASSIGN TO COL, 13 ALL OTHER EXPENSES. SEE WORK TABLE 5.

FOOTNOTES SCHEDULE A SHEET4.1Q
6/ (TO 108-116) IF EXPENSES ARE INCLUDED IN THE STUDY COMPUTE BY MULTIPLYING THE AVERAGE BASE FDR AMORTIZATION OF DEFENSE PROJECTS.
EQUIPMENT, AT THE END DF THF PREVIOUS YEAR AND AT THE END DF THE STUDY YEAR, BY THE DEPRECIATION RATES1 BY THE
CLASSES OF EQUIPMENT FOR THE STUDY YEAR. .IF THE DATA IS AVAILABLE, ASSIGN DIRECT. SEPARATE FREIGHT TRAIN CARS
% TO MILEAGE AND % TO TIME, WHERE DATA IS NOT AVAILARLEs APPORTION ON THE BASIS OF WORK TABLE 6b
LINE 39. (LINE 114, COLS. 12 & 13) SEE WORK TABLE 6* 2/.

12/ (TO LINE 131) WHERE FORMULA IS APPLIED FOR INDIVIDUAL CARRIERS OWNING CARS RENTED ON MILEAGE BASIS, THE EXPENSES FOR ACCTS. 302O
304, 305, 306, 329, 336 & 337 RELATED Tn SUCH MILEAGE CARS SHOULD BE DETERMINED ON THE BASIS OF SPECIAL STUDY (MULTIPLIED BY
APPROPRIATE VARIABILITY) AND ASSIGNED TO cOL. 33. THE BALANCE OF THESE ACCTS. ARE DISTpIBUTED ON PERCENT IN LINE BB.

6/ (To LINE 193) IF EXPENSES INCLUDED IN STUDY, COMPUTE BY MULTIPLYING THE AVERAGE BASE FOR AMORTIZATION OF DEFENSE PROJECTS;ROAD
AT THE END OF THE PREVIOUS YEAR & AT THE END OF THE STUDY YEAR BY THE APPLICABLE DEPRECIATION RATES BY TYPE OF PROPERTY FROM
WORK TABLE t7 COL. 10 FOR STUDY YEAR.

SCH. As SH. 2;10; 8/ COL, 5 LINES 10, 11 C THE TOTAL OF LINES 4 & B8 KESPECTIVELY,
NOTE WHERE THERE ARE NO CHARGES TO AcCTS. 383 & 384 ASSIGN %% TO COL. 7a % TO COL. B AND
SEE FOOTNOTE TO SCH. A, S~. 2.10' 8/. IF THERE ARE NO CHARGES TO ACCTS. 383, 384 395 & 396 ASSIGN
ASSIGN % TIMES TO COL.7 AND % TIMES TO CUL. 8. PERCENT ARE FROM 4/ ABOVE.

APPORTION TO COLS. 4, 5 & 6 ON THE BASIS OF LINE 3 ABOVE. IF A CREDIT FIGURE DEVELOPS IN LINE 6, COL. 6 APPORTION TO CO0CS
4 & 5 ON THE BASIS OF LINE 2 COLS. 4 & 5.
** ASSIGN TO LINE S COLS. 4 E 5 THE AMOUNTS FROM WORK TABLE 18, LINE 8, COL. 6 & LINE 9 COL. 3 RESPECTIVELY

9/ (TO LINE 228 & 229) THE COUNT OF CARS INCLUDES THE LINE HAUL CARS SWITCHED BY THE TERMINAL COS. FOR THE LINE HAUL CL.I CARRIERS.
RATIO OP ENGINE HOURS OF SWITCH SERVICE FOR WHICH SCT COS, COLLECT REVENUE FOR THEIR OWN ACCOUNT AND FOR WORK OF CARRIERS OTHER
THAN CL. I LINE HAUL CARRIERS, BASED ON SPECIAL STUDIES, IS ESTIMATED TO BE NOT OVER .25. THEREFORE MULTIPLY THE TOTAL FREIGHT
IN THE ACCOUNTS BY % AND ASSIGN To COL, 3.